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Lawyers Say US EPA's GHG threshold rule on shaky legal ground

13 January 2021 Amena Saiyid

A new federal regulation setting an emissions threshold for limiting total greenhouse gases from all industries won't withstand a legal challenge but is sure to cause a minor headache for the US Environmental Agency (EPA) under the Biden administration.

Eight days before President Donald Trump leaves office, the EPA published a rule on 13 January that sets 3% of total gross US greenhouse gas (GHG) emissions as the significant threshold at which the agency can regulate releases of these pollutants. Below that level, the EPA said no endangerment of public health would ensue.

The rule, which takes effect 21 March, applies not just to the power sector, but to all industries, including oil and natural gas wells and refineries as well as chemical and petrochemical plants.

The EPA took this action in a final rule that was meant to finalize the Trump administration's rewrite of 2016 GHG standards for newly constructed or modified coal-fired power plants.

At least one legal scholar and two attorneys specializing in the Clean Air Act told IHS Markit on 13 January that EPA's action could result in challenges under the Administrative Procedure Act (APA), the US law governing how federal agencies develop and issue rules after giving the public advance notice and a chance to react and comment. The Clean Air Act is designed to limit air pollution from both stationary and mobile sources.

"The final rule violates the APA because it isn't a logical outgrowth of EPA's 2018 proposal and the public didn't get a meaningful opportunity to comment on the 3% threshold for significance," Jack Lienke, regulatory policy director at the Institute for Policy Integrity and an adjunct professor at NYU School of Law, said.

Agreeing with Lienke, Megan Houdeshel, a Clean Air Act attorney with Dorsey & Whitney LLP who focuses on compliance, said the EPA, in its haste, may have failed to consider counterpoints because there was no comment period. The 13 January rule is a "thin slicing of the EPA's regulatory authority without any input from the public on whether that 3% threshold makes sense or is in line with congressional intent. It's likely this will get challenged in court on this basis if not revisited by the Biden administration," Houdeshel said.

EPA said it derived its authority from Section 111(b)(1)(A) of the Clean Air Act, which requires the agency administrator to include source categories on a list for regulation "if in his judgment it causes, or contributes significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare."

"No comment," was EPA spokesman Ken Labbe's response when IHS Markit asked whether the agency can set a specific emissions threshold without seeking comment on it, and risk violation of the APA.

The lawyers, however, agreed that EPA's rule will only result in a speed bump in the Biden administration's path to reaching net-zero carbon levels for the power sector by 2035 and across the economy by midcentury.

"It's definitely a gnat of a headache" for the Biden administration because it will require EPA to either take steps administratively or go through the courts, said Eric Boyd, another Clean Air Act attorney with Thompson Coburn LLP.

Lienke also likened it to "a headache," but not a "migraine."

"I don't think the Biden administration will even need to do a standalone rulemaking to repeal this policy. Instead, when the Biden EPA proposes greenhouse gas standards for a new source category—such as refineries—it can simply, as part of that proposal, acknowledge the interpretation of 'significance' offered in this week's rule, explain why the interpretation is unreasonable, and announce that it will henceforth use a different approach," he added.

The final rule, as described by the EPA in its own regulatory agenda, was meant to finalize the agency's proposal to set GHG standards for new or modified coal-fired electric generating units, or EGUs based on the best system of emissions reductions (BSER). At the time, EPA had proposed the BSER to be "the most efficient demonstrated steam cycle (e.g., supercritical steam conditions for large units and subcritical steam conditions for small units) in combination with the best operating practices."

Instead of finalizing that proposal, EPA said EGUs can be regulated because they contribute 25% of total US GHG emissions based on its significant pollutant contribution finding. It also decided to ignore the basic premise of the 2018 proposal, contending it would revisit it in a separate rulemaking.

"Any action regarding the proposal to revise the standards of performance, including the underlying determinations of the BSER, for new, reconstructed, and modified coal-fired EGUs, including certain technical issues, is beyond the scope of this final rule and comments received on the 2018 proposal will be addressed in a separate future action," EPA wrote.

In a 12 January statement, which EPA issued a day before the rule was published in the Federal Register, the agency acknowledged the rule was the result of a finding for a completely separate 2020 final oil and gas rule, which said "the EPA, as a predicate to promulgating [new source performance standards] for certain air pollutants, must determine that the pertinent pollutant causes or contributes significantly to dangerous air pollution."

In 2020, EPA used this significant pollutant contribution finding to rescind the Obama EPA's regulation of methane, a GHG that is 80 times more potent than carbon dioxide, from new and modified oil and gas production and processing units. At the time, EPA indicated it would pursue a separate rule to determine the criteria for determining significant pollution contributions.

Posted 13 January 2021 by Amena Saiyid, Senior Climate & Energy Research Analyst, IHS Markit

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